TVL is certainly not the best DeFi value metric

Yes, as an industry I believe there are some realities we need to come to terms with rather than build false truths around "growth" "value" or "efficiency". As a user of this technology, you'd realize the the larger it grows, the trickier it gets to understanding it.

One of the major problems most businesses have is that data or statistics are often either understated, that is in a situation where a high value equals a flaw, and in other times often overstated and we see this quite often when people want to talk about growth and value streams, these data presented to us are often bended off the realities of the actual numbers. Funny thing is that this has a huge effect on a business just as it has on a user because even the system can learn to believe this false data and therefore lack the ability to grow past it.

FTX as a Case Study

So much happened last year in the crypto space and a lot of value was sucked out of the system in the process, with FTX, numbers were hugely misrepresented and that backfired a great deal. You figure that the majority of the time where reports on the state of everything surrounding the centralized cryptocurrency exchange were given, the data set was hugely misreported.

On so many public cases, Sam Bankman stated as in form of a "report" that FTX was solvent and that customer assets were 100% backed and funds safe, but that turned out to not be the case when panic flew in fast and people began to demand a withdrawal of all funds held on the exchange, here's where a supposed solvent exchange could not honor these requests.

In DeFi, we have something rather similar as the majority of the metrics we use to measure the value of an ecosystem is more of a misrepresentation and falsely built truth rather than any facts on value, growth or efficiency. I had the chance on me one of these days to read up a little about Solana and I discovered some rather shocking numbers which after stumbling on some proper details on twitter I figured a lot of data is grossly false and bent to serve the purpose of attraction in a marketing campaign.

Solana, as we've been told, could handle about 710,000 transactions per second, well, don't get your hopes high as these numbers are largely made up of on-chain validators messages of which we cannot deny that there's an atom of value, but it is not a direct monetary transactions that adds any layer of value to the chain, it is more of a burden than a merit.

Total Value Locked(TVL)

In DeFi, this is what most people leverage as a representation of value and it is however one of the most misleading metrics for one to determine the value and sustainability of an ecosystem.

Crypto assets are like stocks not lands, you can buy 100 lands and sell them all back at an even higher price that is predetermined by you, but with stocks and crypto, we are dealing with something that requires liquidity for such to occur, so when you're looking at market cap, TVL and many other metrics derived from coin price, they are largely misleading as the displayed value can never be fully extracted from the network if that was to happen.

The current market cap of bitcoin is $453,604,764,863, however, if every holder of bitcoin were to attempt dumping their assets, it is rather unlikely that even half of this value stated above can we extracted, so the market cap isn't a true determination of value just as TVL isn't for DeFi projects and protocols.

When trying to determine the value of an ecosystem you want to look at "users" first, then look at the percentage involvement of these users, their activities overtime will tell you more about the system than any other thing will because the market is moved by people and builders mirror the needs of the public, thus, the ultimate metric for the determination of value is people, the users are your biggest bet, studying them helps you extract valuable sub-data on the value flow in the ecosystem.

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